Skills shortage hits financial services sector

(PATRICK CASTILLO)

By

Karen Remo-Listana

PublishedThursday, May 01, 2008

Skills shortage in the property and construction sectors is known to have caused delays in many projects in the Gulf – but it turns out that the financial services sector is in the same boat, Emirates Business has learned.

Firas Mallah, Dexia Asset Management's Middle East head, citing surveys from a number of headhunters in the region, says the average time a financial services professional stays in one job is seven months. "This means if you hire finance professionals you're lucky if he or she doesn't leave after the annual bonus," said Bahrain-based Mallah. "That's an advantage of being based in Bahrain, there is lesser job volatility. The average time span in Bahrain is 18 months against Dubai's seven months."

But even an 18-month retention rate is far below the rates in financial markets in the West, said a source who asked to remain anonymous. He said: "Here in the UAE you will find it a common scenario for a financial services executive to hop through three companies in less than two years."

Wassim Moukahhal, private equity associate at The National Investor, said the financial services sector all around the world had a generally higher attrition level compared to other sectors – but attrition rates in the GCC region were far higher.

"The industry, especially here in the GCC, is definitely having a big issue on retention," he told Emirates Business. "All financial companies are looking at the same pool of talent, which is scarce. In this part of the world every person who finds a new job gets another offer the next day, and with better pay and benefits. This situation calls for companies to pay higher salaries and this in turn puts a burden on companies."

A recent survey conducted by Bayt.com in conjunction with market research specialists YouGovSiraj showed bankers emerged at the top of the salary scale. In terms of the structuring of total compensation, the banking, finance and retail industries received the highest proportion of variable income in the form of bonuses, commissions and incentives, with 23 per cent of respondents in both industries asserting that this portion of income accounted for more than 21 per cent of total income.

Moukahhal said the attrition rates were due to rapid economic growth and the financial services' "un-preparedness" and instability.

"The market is still not mature so there's a lot of shake-ups all the time," he said. "It's very important for financial institutions to have consistency. In the case of private equity you really need to have the same team to work for a long time. Clients are used to dealing with a certain team from that company and if that individual leaves then there is a chance for him to just take that guy with him."

In addition, low retention rates put a company at risk of losing its "know-how" and incurring lower profitability.

Mohammed Benayoune, head coach of the Canada-based Achievement Centre International, said companies lost millions of dollars in revenue through constantly having to replace poached staff. Benayoune said in addition to the sub-prime crisis, the lack of talented leadership was a key factor behind the financial losses. Salaries and benefits were important but they only went so far in resolving the problem. Other companies would follow market trends and raise their salaries and might even offer better benefits.

"In the poaching game, no one benefits," he told Emirates Business. "Research suggests the star employees are the first to be poached by competitors and are less likely to stay. The new stars rarely sustain their performance in the new organisation." The poaching game, however, is slated to continue as a combination of the falling dollar and the rising cost of living across the GCC leads to unprecedented levels of discontent among regional employees, according to a study released this week.

The bayt.com-YouGovSiraj study has found that across the GCC and sectors, salary hikes were far outstripped by perceived cost of living increases. The disparity was the most pronounced in Qatar, with a perceived average cost of living spike of 38 per cent, 22 per cent higher than salary increases. In Dubai, living expenses have reportedly risen 37 per cent, representing a gap of 20 per cent.

The widening shortfall between salary hikes and the living cost has led many to consider dramatic steps. In Qatar, 50 per cent of respondents said increases in household expenses have led them to plan relocating to another country or returning home. Oman came second, with 47 per cent, while Kuwait saw the lowest numbers of professionals looking to leave the country, at 32 per cent. In the UAE, 37 per cent had thought about moving abroad.

In the UAE employers are taking the hit of this economic shortfall, with many employees considering job migration to improve finances. Forty per cent of UAE workers said rising expenses might force them to look for a better job in the same sector and 24 per cent said they would consider switching to another industry. In Saudi Arabia, corresponding figures were 45 and 19 per cent. Only 15 per cent of people in Qatar and 20 per cent in Oman said they would consider changing industries.